Select Service Hotels

Why Select Service Hotels Are Coming to the City Center

As apps like Uber Eats rise in popularity, hotel guests are opting for smaller rooms in the heart of the city with less on-site perks.

Why Select Service Hotels Are Coming to the City Center

It used to be that guests at every downtown hotel expected bell staff, a concierge, extensive meeting spaces and spacious rooms. But these days, guests are getting comfortable with a lot less.

Select service hotels with fewer amenities and smaller rooms — once confined to suburbs, small towns and the areas surrounding airports — are growing in city centers. This industry sector has seen double-digit percentage change growth in terms of the number of rooms that exist in major U.S. markets from 2015 to 2019, according to JLL research.

Hotel brands like Hilton Garden Inn, Tru by Hilton, Courtyard by Marriott, Hyatt Place and many others are limited-service versions of the flagship brands in their names.

“Select service hotels have become the darling of the industry,” says David Black, Managing Director, JLL Project & Development Services, Hotels & Hospitality. “Major hotel brands have become more creative in their offerings, blurring the lines between select service, soft brands and a traditional hotel.”

The growth has been dramatic across the U.S. In the Los Angeles metro area (MSA). For example, there will be 37,000 select-service hotel rooms in 2019, up from 30,000 in 2015, according to JLL. The Miami MSA will have 18,000 rooms this year, up from 14,000 four years ago. Those numbers are 57,000 and 47,000 respectively in the Washington, D.C. MSAs.

“Much is driven by the popularity of the product with consumers,” Black says. “But it is also driven by significant advantages for owners and developers due to lower development and operating costs.”

Changing consumer preferences

What consumers expect from their hotel is driving the shift. More business and leisure travelers are finding that their travel needs are adequately satisfied with streamlined services, even in mid- to upper-tier hotels, says Andrea Grigg, Managing Director, Asset Management, JLL’s Hotels and Hospitality Group.

Instead of having a full-service restaurant, or even room service, on-demand services like Postmates or Uber Eats let travelers have their food of choice delivered.

“Today’s tech savvy travelers, particularly millennials, are looking for the perfect package of an unpretentious lodging experience and thoughtful design connected to the local community — not cookie cutter spaces, overpriced mini-bars, and old-fashioned coffee machines,” Grigg says. “They are happy to pay lower rates for smaller rooms if these other elements are met.”

The change also comes as metropolitan hubs across the country swiftly become more urbanized. In one area of downtown Miami, the population increased by more than 2000 percent in the last decade, according to worldpopulationreview.com, which asserts that Miami is now the sixth fastest growing region in the United States. And that’s just one of a number of major U.S. cities that are growing fast. A 2018 report by USA Today says that 65 percent of the U.S. population now lives in cities. As cities grow denser and more populous, urban hotels are streamlining their services and narrowing their footprints, fitting more rooms into smaller spaces.

“Major brands are looking at ways to diversify their offerings for both consumers and hotel developers,” Black says. “The ability to develop a significant amount of rooms on smaller sites allows an owner to create a value-driven product while still putting significant emphasis on communal space that attracts both travelers and locals alike.”

Advantage: operators

Operators in major metropolitan cities say that the savings on operating costs from eliminating large rooms, formal restaurants and spacious lobbies in high-rent city centers can be, in part, passed on to travelers who, in the modern age, are increasingly used to using apps like Uber Eats and prefer local experiences.

At the Tru by Hilton, near the Alamo in Downtown San Antonio, for example, a cafe serves breakfast only, but a 24-hour market sells snacks and drinks. There’s not a large lobby, but guests can play pool or board games in the cozy space.

The cost savings proposition also eliminates some labor costs for owners and operators.

“High labor costs become less of an issue when there are less frills and less employees required to operate the hotel, leading to greater profit margins and less risk,” Grigg says.

Crunching the numbers on smaller rooms

These rooms are much smaller than those of full-service hotels. Marriott’s Moxy has burst into many markets with room sizes that are typically 180 square feet — about half of the 325 square feet that is the average U.S. hotel room size — according to Geraldine Guichardo, Vice President, Americas Hotels Research for JLL.

Micro-hotel chains such as Pod, CitizenM and Yotel are taking this concept even further in cities such as Washington, D.C., San Francisco and Miami. Pod has rooms that are under 100 square feet, but the point is not to linger in them anyway. There are board games to play in the hotel’s colorful Playroom Lounge and much to see in the central locations in which the hotels are located. CitizenM, which recently opened a New York location in Times Square, is proudly anti-full service, declaring on its website that it has “absolutely no trouser presses, bellboys or other tired old hotel cliches.”

The development of new, full-service hotels, meanwhile, has been declining, despite the fact that the ones that currently exist are in high demand from an investment transaction perspective, Guichardo says.

“The only city where full-service hotel construction is not declining is Miami, where there are high numbers of Latin American travelers who still expect conventional amenities,” she says.